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Is SPDR S&P Insurance ETF (KIE) a Strong ETF Right Now?

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Launched on 11/08/2005, the SPDR S&P Insurance ETF (KIE - Free Report) is a smart beta exchange traded fund offering broad exposure to the Financials ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

KIE is managed by State Street Global Advisors, and this fund has amassed over $769.84 million, which makes it one of the average sized ETFs in the Financials ETFs. KIE seeks to match the performance of the S&P Insurance Select Industry Index before fees and expenses.

The S&P Insurance Select Industry Index represents the insurance segment of the S&P Total Market Index.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

The fund has a 12-month trailing dividend yield of 1.43%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 100% of the portfolio, the fund has heaviest allocation to the Financials sector.

When you look at individual holdings, Oscar Health Inc Class A (OSCR - Free Report) accounts for about 2.86% of the fund's total assets, followed by Axis Capital Holdings Ltd (AXS - Free Report) and Lincoln National Corp (LNC - Free Report) .

The top 10 holdings account for about 24.48% of total assets under management.

Performance and Risk

So far this year, KIE has added roughly 16.77%, and was up about 30.15% in the last one year (as of 07/17/2024). During this past 52-week period, the fund has traded between $41.43 and $52.43.

The ETF has a beta of 0.84 and standard deviation of 18.13% for the trailing three-year period, making it a medium risk choice in the space. With about 50 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR S&P Insurance ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

Invesco KBW Property & Casualty Insurance ETF (KBWP - Free Report) tracks KBW Nasdaq Property & Casualty Index and the iShares U.S. Insurance ETF (IAK - Free Report) tracks Dow Jones U.S. Select Insurance Index. Invesco KBW Property & Casualty Insurance ETF has $303.28 million in assets, iShares U.S. Insurance ETF has $599.96 million. KBWP has an expense ratio of 0.35% and IAK charges 0.40%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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